Why CYNK is different from ‘Wolf of Wall Street’

It is not often that penny stocks—and the pump-and-dump fraud schemes to which they are vulnerable—receive much attention beyond the blogs and chat rooms that cover the Wild West of over-the-counter micro-caps. And then along comes CYNK Technology.

It remains undetermined if fraudulent activity allowed CYNK's shares to peak over 36,000 percent before Friday's trading halt from the Securities and Exchange Commission. If the stock were manipulated, however, it would represent the latest in a constantly evolving scam: the "pump and dump," which was made famous in part by Jordan Belfort, the so-called "Wolf of Wall Street."

But former federal prosecutor Joel Cohen, who led the criminal investigation against Belfort as an assistant U.S. attorney, said the days of boiler rooms and high-pressured stock telemarketing are gone, and that we are seeing the Gen Y of pump and dump.

SEC on to CYNK Technologies

The SEC has halted shares of CYNK Technologies temporarily, after the stock took off in the past month. Former federal prosecutor Joel M. Cohen, and CNBC's Herb Greenberg, discuss what the SEC will investigate, and what will happen to the investors' money if it is indeed fraudulent.

"The Internet has changed much about how pump and dump works," Cohen told CNBC. "Boiler rooms don't exist to the same degree. Legions of young brokers aren't necessary. Nor are large offices," he said.

Cohen, a partner with New York-based law firm Gibson Dunn, said that the personalities involved in today's pump and dumps have also evolved.

"Enigmatic figures like Jordan Belfort don't surface—anonymity is the key to success on modern penny stock fraud," Cohen said. "The pumps often have shorter runs. The promoters don't as typically appear in connection with multiple transactions: It's more akin to terrorist tactics rather than frontal warfare."

If CYNK's massive runup were influenced by these manipulative tactics, then the scam was not particularly well executed, penny stock trader Tim Sykes told CNBC.

Still, Cohen said Belize-based CYNK, which records show has only one employee, will come under close federal scrutiny after its trading halt on Friday.

"The SEC does have a task force on this," Cohen said, adding that the SEC will look for any indication that the behavior of promoters or nominees holding CYNK Technology's stock caused the precipitous rise in price.

CYNK stock was halted at $13.90 on Friday—it had crossed $21 at one point on Thursday, and began June at less than a dime.